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Craft Smith LLC v. EC Design LLC

United States District Court, D. Utah

May 17, 2019

CRAFT SMITH, LLC, a California limited liability company, Plaintiff,
v.
EC DESIGN, LLC, a California limited liability company, Defendant. EC DESIGN, LLC, a California limited liability company, Counterclaimant,
v.
CRAFT SMITH, LLC, a California limited liability company, and MICHAELS STORES, INC., a Delaware corporation, Counterclaim Defendants.

          MEMORANDUM DECISION AND ORDER

          Dee Benson U.S. District Judge.

         On April 5, 2019 the court heard oral argument on EC Design's Motion for Partial Summary Judgment on First Claim for Copyright Infringement, Craft Smith and Michaels' Motion for Summary Judgment, as well as Craft Smith and Michaels' Motion to Exclude Richard S. Hoffman and EC Design's Motion to Exclude Expert Opinion of Clarke Nelson. (Dkt. Nos. 96, 99, 107, 110.) At the conclusion of the hearing, the court took the matter under advisement with a written order to follow.

         BACKGROUND

         EC Design claims that when Craft Smith and its distributor Michaels Stores began selling the Recollections Planner in October 2016, they infringed on 1) EC's LifePlanner trade dress under 15 U.S.C. § 1125(a) and 2) EC's copyright in the LifePlanner under 17 U.S.C. § 101 et seq. (See Dkt. No. 54 at 6; Dkt. No. 112 at 6-8, 19.) EC also brings several state law unfair competition claims against Craft Smith and Michaels. (Dkt. No. 54 at 41-47.)

         Erin Condren is the founder of EC Design, a California designer and retailer of personal planners, organizers, notebooks, stationery, school and holiday goods, which it sells on its website www.erincondren.com, Amazon, and other retail locations. (Dkt. No. 54 at 7.) Craft Smith, one of EC's competitors, is a California company that began operating in January 2014; it makes and sells products in the personal organizer and crafts markets, including planners under the “Recollections” brand. (Dkt. No. 2 at 2; Dkt. No. 112 at 12.) Michaels is a Delaware corporation that sells craft, art, scrapbook, and stationery products at its numerous retail stores, as well as its website www.michaels.com. (Dkt. No. 2 at 7-8.) Craft Smith and Michaels have worked together to develop and sell planners since 2014; Michaels is by far Craft Smith's largest customer. (Dkt. No. 112 at 12.)

         In 2007, Erin Condren created EC's flagship product, the LifePlanner. (Dkt. No. 112 at 8.) The LifePlanner has evolved significantly over time since 2007. According to EC, “[e]ach year since 2007, EC's product development team [has created] a new version of the LifePlanner that builds on Ms. Condren's original design.” (Id.) From 2007 to 2015 EC only offered LifePlanners with a vertical layout, but since its 2015-16 LifePlanner version it has offered both horizontal and vertical layouts. (Id.) The vertical layout uses different artwork and graphics than does the horizontal layout. (Dkt. No. 138 at 7.)

         As of October 2016, the LifePlanner products purchased through the erincondren.com website were customizable. Purchasers could select (i) cover artwork; (ii) removable or “luxe” cover style; (iii) a custom message or photograph for the cover; (iv) layout style; (v) coil color; (vi) colorful or neutral color scheme; and (vii) gold foil accents. (Dkt. No. 98 at 10-12.)

         Since 2009, EC claims to have sold 1, 549, 770 LifePlanner products, with revenue from these sales totaling approximately $65 million. (Dkt. No. 54 at 23.) In 2016 alone, EC received $18.5 million in U.S. sales of the LifePlanner. (Id.)

         On January 15, 2015, EC reached out to Craft Smith to discuss a “possible . . . private label creation between [the] two companies.” (Dkt. No. 112 at 10.) Craft Smith's owner and designer were both enthusiastic about the potential to work with EC; Craft Smith's internal correspondence reveals a high level of interest in and admiration for EC's brand, planner quality, and popularity in the market. (See Dkt. No. 112 at 10, 15.) Craft Smith proposed working with EC to develop a planner together to sell in Michaels stores; ultimately, however, they were unable to arrive at an agreement. (Id. at 11.)

         Six months after discussions ended with EC, Craft Smith began preparing to propose a new spiral-bound planner to Michaels that would be similar to EC's LifePlanner. (Dkt. No. 112 at 12.) This would be the first spiral planner Craft Smith had produced. (Id.) In February 2016, Craft Smith sent its manufacturer in China an EC LifePlanner sample to get a baseline for what its pricing would be on the proposed product for Michaels. (Id. at 13.) Craft Smith told the manufacturer, “We want the book with the same size and quality of spiral and same laminated type cover. I want to get a quote for this. Same pagination and sheet counts and everything the same.” (Id.)

         On February 29, 2016, Michaels and Craft Smith met to discuss developing a new 2017 planner series to launch in the fourth quarter of 2016. (Id.) According to meeting notes, Michaels' and Craft Smith's “[c]oncept [was] to manufacture a like item to the current Erin Condren Life Planner.” (Dkt. No. 112 at 14.) The projected cost for the new spiral planner was “based on everything you see in the EC planner, ” with a projection that the new planner could be offered at a discounted price of $24.99-$29.99 in comparison with the LifePlanner's retail price of $40. (Id.)

         On March 24, 2016, Craft Smith completed its horizontal and vertical Recollections Planner calendar arrangements in black and white, as well as the “initial cover . . . themed . . . [and] calendar artwork.” (Id.) By April 5, 2016, the final artwork and arrangement of the new planner series was approved by Michaels to move forward. (Id. at 16.) The planner files were sent to the manufacturer in China on April 5th, along with instructions to “match [the new planner] exactly to sample” referring to the LifePlanner Craft Smith had previously provided. (Id.)[1] The sticker pages were purposefully sized to match the LifePlanner's weekly layouts. (Id. at 17.) Craft Smith emphasized that the new Recollections Planner needed to “feel like overall weight of current sample.” (Id.) On April 6, Craft Smith further instructed the manufacturer to “match [the spiral size] of the sample.” (Id.)

         In early April 2016, Michaels asked Craft Smith to compare the new Recollections Planner with the LifePlanner, including a request to make sure that no quotes were copied from the LifePlanner “to make sure our planners are not too similar to hers.” (Id. at 18.) Craft Smith provided the “specs” of both planners, revealing that both planners are sized at 7.25” x 9.25”, and that the twelve-month versions both have a total of 178 pages, and both have removable covers. (Id.) EC alleges that the design and arrangement of Recollections didn't change after that comparison was finished. (Id.) On April 26, Craft Smith submitted its first purchase orders to the manufacturer. (Id. at 17.) One day later while reviewing the planner's packaging images, a Craft Smith employee “noticed that there are still a few things on them that need to be photoshopped, like some of [EC's] prints are showing in spots b/c we used her books for part of our mock-ups. So that definitely needs to be fixed to avoid any major problems.” (Id.)

         In May 2016, Michaels approached EC to discuss the possibility of Michaels carrying EC's planners at its stores. (Id. at 11.) Prior to that meeting, Craft Smith had shared consumer survey results showing that “Erin Condren was the most popular” planner brand. (Id.) However, this relationship also never materialized as the parties failed to agree on a licensing fee or royalty rate. (Id.)

         Michaels released Craft Smith's Recollections Planner in October 2016, which was viewed as “a hit” with customers. (Id. at 19.)

         On November 29, 2016, Craft Smith received a letter from EC Design's counsel which included an express allegation that Craft Smith had infringed on EC's alleged copyrights and trade dress rights in the LifePlanner. (Dkt. No. 2 at 3.) EC demanded that Craft Smith immediately cease selling or advertising any planners, including the Recollections Planner, that incorporate any design, text, graphic, color combination, or other material allegedly found in the LifePlanner, and to notify all distributors to return unsold planners to Craft Smith. (Id.)

         On December 8, 2016, Craft Smith filed a complaint in this court against EC seeking a declaratory judgment of no copyright infringement and no trade dress infringement, as well as an award of Craft Smith's costs and attorney fees. (Id.)

         On the same day Craft Smith initiated this action (December 8, 2016), EC applied for the following copyright registrations from the U.S. Copyright Office for its 2016-17 LifePlanners, which were granted on December 12, 2016:

• LifePlanner Horizontal Layout 2016/2017, U.S. Registration No. VA 2-024-598.
• LifePlanner Vertical Layout 2016/2017, U.S. Registration No. VA 2-024-599.

(Dkt Nos. 110-12, 110-13, 110-15, and 110-16.)

         Approximately eight months later, on August 11, 2017, EC applied for a compilation copyright in “2-D artwork, layout and graphics” as well as “Selection, coordination, and arrangement of text and 2D artwork.” (See Dkt. No. 110-17.) Before the copyright was granted by the U.S. Copyright Office, the Copyright Office specifically refused registration of EC's LifePlanner “layout” claim, and provided the following rationale:

… “layout” does not describe a copyrightable type of authorship. Please note that the general layout or format of a book, a page, a slide presentation, a website, or the like, is not copyrightable because it is a template of expression. Compendium of U.S. Copyright Office Practices, Third Edition § 313.3(E). As such, please authorize me to remove the term “layout” from the applications.

(Copyright Office Correspondence, Dkt. No. 138-2 at 5.)

         The Copyright Office accordingly registered the following modified version of EC's copyright claim in “2-D artwork, compilation of introductory and section phrases, graphics” on August 17, 2017: 2016/2017 Vertical LifePlanner Compilation, U.S. Registration No. VA 2- 072-725. (Dkt. No. 110-18.)

         EC's alleged LifePlanner trade dress is unregistered. (Dkt. No. 98 at 10.)

         On January 18, 2018, EC filed its second amended counterclaim against Craft Smith of copyright infringement, trade dress infringement under the Lanham Act, and other unfair competition and misappropriation claims, seeking injunctive relief, damages, costs, and attorneys' fees. (Dkt. No. 54.)

         DISCUSSION

         A party moving for summary judgment meets its burden by demonstrating “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). An issue is genuine “if there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way.” Becker v. Bateman, 709 F.3d 1019, 1022 (10th Cir. 2013). An issue of fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998).

         The moving party may satisfy its initial burden of making a prima facie demonstration that no genuine issue of material fact exists by pointing out to the court a lack of evidence for the nonmovant on an essential element of the nonmovant's claim. See Adler, 144 F.3d at 670-71. “If the movant carries this initial burden, the nonmovant that would bear the burden of persuasion at trial may not simply rest upon its pleadings; the burden shifts to the nonmovant to go beyond the pleadings and set forth specific facts . . . from which a rational trier of fact could find for the nonmovant.” Id. at 671.

         I. Copyright Infringement Claim

         The Constitution's Copyright Clause gives Congress the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors . . . the exclusive Right to . . . their . . . Writings.” Art. I, § 8, cl. 8. The plain meaning of Article I, § 8, cl. 8 of the Constitution demands original authorship for a work to merit copyright protection. Pursuant to this constitutional authority, the Copyright Act of 1976 (“Copyright Act”) was enacted to provide copyright owners with “exclusive rights” to distribute, reproduce, or prepare derivative works of their “original works of authorship fixed in any tangible medium of expression.” 17 U.S.C. §§ 102(a), 106. Originality is thus both constitutionally and statutorily required, and has been described as the “sina qua non” and “touchstone of copyright protection.” Kelley v. Chicago Park Dist., 635 F.3d 290, 302 (7th Cir. 2011). The traditional dichotomy employed by courts in copyright cases to differentiate between facts or ideas and expression of those facts or ideas “derives from the concept of originality which is the premise of copyright law.” Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th Cir. 1981).

         Not all copying amounts to copyright infringement. See Compaq Computer Corp. v. Ergonome Inc., 387 F.3d 403, 408 (5th Cir. 2004). To prevail on a copyright infringement claim under the Copyright Act, a party (here EC Design) bears the burden of proving (1) that it owns a valid copyright, and (2) that the defendant copied protectable constituent elements of the copyrighted work. Mitel, Inc. v. Iqtel, Inc., 124 F.3d 1366, 1370 (10th Cir. 1997); Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 548 (1985).

         a. Ownership of a Valid Copyright

          To ultimately succeed in its copyright claim, EC Design must first show that it owns a valid copyright in its 2015-16 LifePlanners. In modern copyright cases, this is often established by a certificate of registration which “constitute[s] prima facie evidence of the validity of the [asserted] copyright and of the facts stated in the certificate.” 17 U.S.C. § 410(c). The presumption of validity does not apply, however, to alleged authorship that is not “explicitly claimed in the application” that was deposited with the Copyright Office, as the office “does not examine any authorship that is not claimed in the application.” U.S. Copyright Office, Compendium of U.S. Copyright Office Practices § 503.3 (3d ed. 2017). This prima facie presumption therefore does not extend “to unclaimed authorship that appears in the [registered] work.” Id. Importantly, Section 410(c) of the Copyright Act also provides that “[t]he evidentiary weight to be accorded the certificate of a registration . . . shall be within the discretion of the court.” 17 U.S.C. § 410(c).

         EC Design claims that it owns a valid compilation copyright in EC's “creative selection and arrangement of the many elements, materials, and data comprising the [2015-2016] LifePlanner” (hereafter “EC's asserted compilation”). (Dkt. No. 151 at 7, 12.) EC further argues that because its registered 2016-17 LifePlanner is a derivative of EC's underlying 2015-16 work, EC Design is entitled to a presumption of validity for its underlying compilation. Craft Smith responds that because EC Design never claimed copyright in a compilation of planner parts (divorced of specific artwork, graphics, or text) in its 2016-17 LifePlanner registrations that were deposited with the Copyright Office, EC “enjoys no presumption of . . . validity with respect to the asserted 2015-2016 LifePlanners or the asserted compilation of planner parts.” (Dkt. No. 138 at 5, 12-13.)

         The court agrees with Craft Smith on the initial question of the presumption of validity. Because the copyright asserted by EC Design in this case is a compilation copyright, the court looks first to the language of EC's registration certificate for the “2016/2017 Vertical LifePlanner Compilation” that was deposited in the Copyright Office. (Dkt. No. 110-19.) That registration certificate describes the “limitation of copyright claim” as only including the following new material: “2-D artwork, compilation of introductory and section phrases, graphics.” (Id.) In fact, the certificate explicitly excludes “Calendar arrangement and calendar text” from the copyright claim. (Id.) And as Craft Smith points out, EC initially attempted to claim “layout” as part of its claim for copyright protection, but this was denied by the Copyright Office because “layout does not describe a copyrightable type of authorship.” (Dkt. No. 138 at 41.) Thus, because EC's asserted compilation seeks much broader protection than the scope outlined on the 2016-17 LifePlanner registration certificate, the court finds that EC's 2015-16 LifePlanners are not entitled to a presumption of validity with respect to EC's asserted compilation copyright.

         However, EC points out that even absent a presumption of validity, because “a copyright [automatically] exists the moment an original idea leaves the mind and finds expression in a tangible medium, be it words on a page, images on a screen, or paint on a canvass, ” See La Resolana Architects, PA v. Clay Realtors Angel Fire, 416 F.3d 1195, 1198 (10th Cir. 2005), overruled on other grounds by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010), EC is nevertheless entitled to seek protection for its asserted compilation. Assuming, without deciding, that EC has such a right, EC can only be successful in its infringement claim if it has sufficient evidence to show that the asserted compilation qualifies as EC's original authorship and protectable expression. For the reasons outlined below, the court holds that EC's asserted compilation does not qualify as a work of original authorship and protectable expression, and is therefore not entitled to copyright protection.

         b. Protectable Expression

          “The controlling principle in this case is the basic and unexceptional rule that courts must give effect to the clear meaning of statutes as written.” Star Athletica, L.L.C. v. Varsity Brands, Inc., 137 S.Ct. 1002, 1010 (2017). Courts therefore begin and end their “inquiry with the text [of the Copyright Act], giving each word its ordinary, contemporary, common meaning.” Id.

         Section 102(a) of the Copyright Act identifies eight categories of works of authorship that are protectable: (1) literary works; (2) musical works, including any accompanying words; (3) dramatic works, including any accompanying music; (4) pantomimes and choreographic works; (5) pictorial, graphic, and sculptural works; (6) motion pictures and other audiovisual works; (7) sound recordings; and (8) architectural works. Section 102(b) adds that copyright protection never extends to “any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” 17 U.S.C. § 102(b). “[F]acts, like ideas, are not copyrightable.” 145 Am. Jur. Proof of Facts 3d 1 (2015).

         “Blank forms, such as time cards, graph paper, account books, diaries, bank checks, scorecards, address books, report forms, order forms and the like, which are designed for recording information and do not in themselves convey information” are not protectable works of authorship under Section 102(a). See 37 C.F.R. § 202.1(c). Similarly, “common property containing no original authorship” including “standard calendars” are not subject to copyright. 37 C.F.R. § 202.1(d).

         i. Compilation Copyrights

         Section 103 states that “[t]he subject matter of copyright as specified by section 102 includes compilations . . .” 17 U.S.C. § 103. A “compilation” is defined as “a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.” Id. § 101. Works that meet the statutory definition of a “compilation” may be copyrightable under Section 103 “even if the individual elements making up the compilation are not copyrightable in themselves” under Section 102(a). Dataworks, LLC v. Commlog, LLC, No. 09-CV-00528-WJM-BNB, 2011 WL 2714087, at *5 (D. Colo. July 13, 2011).[2] This interpretation was further articulated by the Tenth Circuit in Enterprise Mgmt. Ltd. v. Warrick, 717 F.3d 1112 (10th Cir. 2013). The court in Enterprise Management held that even if the relevant expression is composed exclusively of non-protectible elements, as long as (1) there are multiple ways to select and arrange those elements and (2) it was selected and arranged in an original and creative manner, that expression may still be eligible for protection as a compilation. The court ultimately found “protectable creative insight in [the plaintiff's] arrangement and choice of expression” of a diagram composed essentially of unprotectable elements. Id. at 1119.

         ii. Requirements of Section 102

         For a compilation to ultimately be protectable, it must qualify as “original authorship” as a whole under one of the eight enumerated categories listed under Section 102. “It is essential to recognize . . . that Section 103 complements Section 102. Thus, while a compilation may be eligible for copyright protection, it must nevertheless satisfy the requirements of Section 102. A compilation must, in other words, represent an original work of authorship, and in no case may copyright protection extend to any ...


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